A year ago i decided to rent out my studio in CA and earned a small amount of rental income but the amount of rental income was always less than the rent i had to pay in the other state.
That doesn't matter. You are still required to report your rental income and expenses on SCH E as a part of your federal tax return. One of your rental expenses will of course, be the rent that you paid for the studio. The fact the rent you paid is more than the rent you received is irrelevant.
Additionally, since you don't own the apartment in CA, you can not claim any depreciation on it. So when asked for the cost basis of the property, COST will be $0 and "COST OF LAND" will be $0. You just flat out can not depreciate property that you do not own. Period.
Bottom line is, your rental business operated at a loss. Additionally, you probably did not rent it at FMRV (Fair Market Rental Value) so once your rental expenses get your taxable rental income to zero, you're done. When renting at less than FMRV, you are not allowed to carry over your unused passive rental losses to the next year.
Do I still need to pay tax on the rental income i earned from CA?
What taxable income? The way I understand your post, you don't have a taxable profit.
I read publication 527 from the IRS website
That means absolutely nothing for any tax liability you may or may not have to the state of CA. Each state has their own tax laws when it comes to the taxation of personal income by that state. IRS Publication 527 applies to federal taxes, not state taxes.
. I did not take any deduction (property tax or mortgage) on the studio in CA.
Of course not. You can't deduct property taxes or mortgage interest if *you* don't have a legal obligation to pay them.
But over all I don't see any taxable profit here. But that does not negate your requirement to report the rental income and expenses to both the IRS and the state. Additionally, if you rented at below FMRV you also don't have any claim to carry over losses either.
